Welfare cheats targeted in new IT upgrade

Welfare fraudsters will be caught out faster under a $1 billion revamp to the Centrelink online payments system.

The federal government has started work on updating the 30-year-old IT system responsible for delivering $100 billion in welfare payments.

Millions of recipients will begin seeing benefits of the upgrade at the end of 2016, in the first stage of the multi-year project.

It will also help the government "stop the rorts", with agencies getting improved data-sharing technology to catch fraudsters out much more quickly.

"(It will give) our welfare cops the tools they need on the beat to collar those who are stealing from taxpayers by seeking to defraud the system," Social Services Minister Scott Morrison said in a statement on Friday.

The upgrade will be one of the world's largest transformations of a social welfare IT system.